Is Europe’s Recession Finally Coming to an End?
Unemployment in the euro zone ticks up further as recession continues to plague one of the world’s largest economies.
In May, unemployment found its highest levels ever, inching up to 12.1 percent. This figure works out to 19.2 million people looking for work, which is 67,000 more than in April. For the larger 27 countries in the European Union, the number was slightly lower at 10.9 percent.
Structural reform in major economies, as well as a central bank that cannot address the problem any more effectively poses significant barriers to growth. Declines in the auto industry, increased borrowing costs for the most hurt countries, and the failure of Greece to shore up its public sector in the face of fleeting money makes for a very precarious European situation.
The joblessness in the EU has increased with only one decline since 2008, and though the worst may be over or upon Europe right now, that is little consolation to the 19.2 million people needing a job.
“With the recession across the euro zone petering out, the peak in unemployment should not be too far away, either,” said Martin van Vliet, an economist at ING Bank, in a note to investors.
Marie Diron, an economist who advises the consulting firm Ernst & Young, said in a statement that lending practices must ease up in order to facilitate growth. “The measure that offers the greatest potential for job creation in the short to medium term is an easing of credit conditions. This would allow companies to invest and as a result recruit in the euro zone.”
The problem, though, remains. Periphery countries are simply dangerous places for a loan right now, with Spain and Greece having unemployment greater than 25 percent. Moreover, the large unemployment that exists equates to a damper on demand, a problem which until recently, has been evident in the near deflationary traits of the European economy.
Inflation did tick up to 1.6 percent from 1.4 which was more attributable to energy prices than a healthy increase among all goods and services.
The economic stagnation has also reached the upper echelon of the economy. Mergers and acquisitions are down in Europe as well as in the U.S. European political weakness in the face of much needed reforms has major firms reluctant to buy up other businesses and expand, as they hold out for decreased market volatility better competitive conditions.
Hernan Cristerna global co-head of JPMorgan Chase’s (NYSE:JPM) mergers and acquisitions division, told The New York Times that the current conditions are like the U.S. Open, golf’s toughest tournament.
“At the U.S. Open, the best players in the world couldn’t break par. It’s the same for our industry. The best M.&A. professionals are unable to get the ball anywhere near the flag. And when we get on the green, we face very long putts for par. We can’t beat the course.”